02 May 2008
DEAR SRIKANTH, SEC 35 D OF INCOME TAX ACT DEALS WITH PREL.EXP. WHICH ARE INCURRED BEFORE COMMEMCING BUSINESS, AFTER COMMENCING BUSINESS FOR EXTENDING THE IND.UNDERTAKING OR SETTING UP NEW IND. UNIT. THE EXP. IS SPECIFIED UNDER ONE OR MORE OF FOLLOWING NATURE. PREPARATION OF FEASIBILITY REPORT, PREPARATION OF PROJECT REPORT, CONDUCTING MARKET RESEARCH, ENG.. SERVICES RELATING TO BUSINESS OF ASSESSEE, LEGAL EXP. FOR DRAFTING MEMORANDUM AND ARTICLES, DRAFTING LEGAL AGREEMENTS RELATING TO SETTING UP A NWEW UNIT, FFEES FOR REGISTERING A COMPANY, PRINTING COST OF M/A,A/A, IN CONNECTION WITH ISSUE OF PUBLIC SUBSRIPTIONOF SHARES OR DEB.LIKE UNDERWRITING COMMISSION,BROKERAGE,AND CHARGES FOR PRINTING,,DRAFTING,TYPING OR ADVERTISEMENT OF PROSPECTUS, ANY OTHER ITEMS AS MAY BE PRESCRIBED.
THE COST OF PREL. EXP. IS LIMITED FOR DEDUCTION (UNDER INCOME TAX ACT)TO 5% OF COST OF PROJECT OR IN CASE OF AN INDIAN CO.OF CAPITAL EMPLOYED IN BUSINESS (OPTION OF CO. TO CHOOSE EITHER)
THE PREL. EXP. CAN BE WRITTEN OFF IN TEN YEARS. R.V.RAO
02 May 2008
Preliminiary Expenses are those expenses which are incurred before commencement of busieness so it is preliminiary expenses. You can refer AS-10, there is also guidance note on Preliminiary Expesnes. For Section it is described in Income Tax Act Refer Section 35D
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